Another day, another bidding war, another house selling for well over the asking price. People it seems have had about enough, but no-one truly knows when relief is coming. Is it Sellers? Is it Buyers? Is it Investors that are driving the market?
Inventory in the Region of Waterloo seems to be at an all time low, hovering at around 1.5 months worth. This low supply has meant that houses today are selling for astronomical prices, certainly when compared to what we've seen in the past, and many are wondering when we're going to see an end to this madness. My belief is that what we are experiencing today, is here to stay for at least the next year or so. Unless a bunch of homes unexpectedly hit the market, or a new subdivision becomes available for occupancy, the demand won't ease. I wanted to examine the demand a little closer, to see what's driving it? Immigration in the region, and in Canada in general is at an all time high, and there is further talk of raising it even higher. This influx of immigrants to region, coupled with our improved infrastructure, which bring with it jobs, and people mean there will be great demand placed on housing. Add to this the number of purchasers we are seeing from 905, 416 and 647 area codes, means we are only competing for what little supply there is within our region, but also from a lot of GTA buyers who don't mind driving the hour or so each way, if they can save a couple of hundred thousand dollars. Let's face it, they are probably doing it already in the GTA. So while yes, there are a number of investors who are snapping up properties, my belief is that the demand non-investors place on the market, is what is driving the price of homes today.
Are you ready2move?
Depending on your investment profile, one way to evaluate a strong investment is to see if it's cashflow positive. In it's simplest form, after all your expenses associated with the property, does the rent leave you with any money left over?
In today's market, my opinion is that to achieve a position of cashflow positive, you either have to look at multi-family residential properties, or have a very large downpayment. Something like 30 or 40 percent. For most people this is not possible, and for investors, this is not desirable. Most investors don't want to tie up a large sum in an investment, they want to buy it with as little money as possible, with other peoples money, ideally.
Single family residences, be it apartment style condos, or a townhome, or a detached, are simply selling for way too much money these days, certainly more than any reasonable amount of rent could cover, especially when you factor in property taxes, insurance, condo fees and potentially a LOC interest only payment.
Multi family residences, triplex, fourplex I think could certainly achieve a cashflow positive position with only 20% down, and would advise investors to consider these as a way to minimize your risks. Though I know some first time investors have concerns with the repairs and management associated with these.
Are you ready2move?
Buying and Selling Residential, Condominium and Investment real estate in the Waterloo Region since 2008. Oh, and also Ottawa! :-D